McDonald’s is likely to see only a modest profit from its $5 meal deal, with profit margins expected to range between 1% and 5%, translating to approximately $0.05 to $0.25 for each bundle sold, according to restaurant analyst Mark Kalinowski.
This meal deal is part of McDonald’s strategy to attract inflation-weary customers back into its restaurants, with the hopes that they will purchase additional items beyond this offering. However, profitability will hinge on several factors, including the costs associated with ingredients, labor, and other overhead expenses.
Consulting firm president Arlene Spiegel noted that the $5 meal deal is more of a promotional tool than a significant profit generator. She highlighted that even if the combo draws customers back, it doesn’t guarantee increased profits for franchisees, who own approximately 95% of McDonald’s locations and manage their own pricing and costs, which include rent, insurance, permits, and taxes.
In May, Joe Erlinger, McDonald’s U.S. president, mentioned that franchisees often implement promotional offers like the $5 meal deal to help alleviate overhead expenses. Nevertheless, Spiegel emphasized that the deal serves as a “loss leader” intended to attract and retain customers. When considering additional costs related to labor, packaging, condiments, delivery, and marketing, she stated that franchise owners may effectively eliminate any profit from the items included in the deal.